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1998 LEGISLATIVE REPORT
Wyoming Water Development Program - Strategic Plan
December 31, 1997

Wyoming generates an average of 16 million acre feet of surface water within its boundaries each year. An additional 2 million acre feet of water is received through streamflow from other states. Of this 18 million acre feet of water, Wyoming is entitled, under the various interstate river compacts and court decrees, which divide the water among the states, to use or consume approximately 4 million acre feet per year. Presently, the state uses 2.8 million acre feet of this water. Approximately 1.2 million acre feet remains available for Wyoming's future use.

The water now in use and the water available for future use are assets of the State of Wyoming and its citizens. The Wyoming Water Development Program is a valuable tool in maintaining these assets. The water demands of downstream states are increasing as these states approach or exceed limits of their water entitlements. Consequently, Wyoming may expect requests for variances or challenges to the historic interpretations of the compacts and decrees that guarantee Wyoming a share of water originating in the state. Further, the federal government is seeking water to resolve endangered species and environmental problems occurring downstream.

Court decisions have validated the position that water entitlements are best protected by beneficial use. Unfortunately, Wyoming's water resources are not always located where they are needed. The Wyoming Water Development Program serves to provide and rehabilitate the infrastructure to deliver water to the people with water supply problems and to promote the effective and efficient use of the state's water, thus maintaining Wyoming's entitlements.

The Wyoming Water Development Program provides long-term economic benefits to the State of Wyoming by providing water supplies for the existing and future needs of Wyoming's citizens. Water availability is a key ingredient for development of a stable Wyoming economy. The projects provide short-term economic benefits to the state in the form of jobs, increased material and equipment sales, and other indirect benefits to local and state economies.

The Wyoming Water Development Program has served to maintain Wyoming's water entitlements and has assisted Wyoming citizens in meeting water supply needs through planning and project development. The program's client list includes seventy-six (76) municipalities, fifty (50) water districts, forty-nine (49) irrigation districts, ten (10) joint power boards, six (6) counties and sixteen (16) water user groups.

A. Program Status - Water Resource Development

In 1977, the revenue source which funds the New Development Program was established. In 1982, the Governor proposed and the Legislature implemented the framework for the present Water Development Program. In 1983, the revenue stream which funds the Rehabilitation Program was established. Since 1983, the program's water resource development activities have evolved to the following:

1. New Development Program

The New Development Program provides planning services and construction funds for the infrastructure necessary to supply unused and/or unappropriated water to meet the present and future needs of Wyoming and its citizens. Water supply and storage facilities such as dams, diversion structures, groundwater wells and transmission pipelines are eligible for consideration under the New Development Program. The New Development Program is dedicated to the efficient and expeditious development of water resources, consistent with state policy, Wyoming water laws and the needs of the citizens of the state. The criteria for scheduling new development projects is based on the general philosophy that effective beneficial use of Wyoming's water will insure its preservation for Wyoming's purposes. New development projects can proceed as sponsored projects or state projects.

a. Sponsored Projects

The project sponsor is a municipality, irrigation district, or other approved assessment district which may be the major beneficiary of the project. The project sponsor must be willing and capable of financially supporting at least 25% of the project development costs plus all operation and maintenance costs. Typically, sponsors request project specific technical and financial assistance from the Wyoming Water Development Commission through the application process. If the application is approved by the Commission, the project is assigned a study level. If the project is determined to be technically and economically feasible and serves to meet a water supply need or alleviate a water supply problem, the Commission may recommend that construction funding be appropriated by the legislature.

The New Development Program provides the opportunity for sponsors to develop water supplies with an eye to the future. The supplies serve to insure that lack of water will not inhibit economic growth or stability. The program has a philosophy that water development can be achieved through state and local partnerships. The sponsor can complete a water supply project with state funding assistance. If the water is used by the sponsor to meet its needs, the project basically belongs to the sponsor. However, if there is the opportunity to sell water for other purposes, the sponsor and state share in the revenues.

b. State Projects

The typical state project serves to benefit more than one entity and is multipurpose in nature. Typically, state projects have difficult permitting or political issues which must be addressed, such as endangered species issues, water quality impacts and/or resistance from downstream states. The following is a listing and brief status statement on the state projects:

• Buffalo Bill Enlargement. The project has been completed and stands ready to meet future municipal and industrial growth and development. The Buffalo Bill Enlargement has a firm yield of 74,000 acre feet at the mouth of the Shoshone River.

• Deer Creek Dam and Reservoir. Pending litigation has impacted the project schedule. The WWDC is working with the Attorney General's Office on the various law suits. Depending on the outcome of the North Platte lawsuit, either the Deer Creek project or the "Pathfinder Modification Project" will be constructed.

• Little Snake River Valley Dam and Reservoir. The environmental impact statement is being prepared.

2. Rehabilitation Program

The Rehabilitation Program provides funding assistance for the improvement of water projects completed and in use for at least fifteen (15) years. Improvements to insure dam safety, decrease operation and maintenance costs, and provide a more efficient means of using existing water supplies can be considered for the Rehabilitation Program. The program insures that existing water supplies and supply systems remain effective and viable.

Rehabilitation projects are typically initiated by an application from a project sponsor. If the application is approved, the project is assigned a study level and can proceed through construction if it is determined the project is technically and economically feasible. The project sponsor must be willing and capable of financially supporting at least 25% of the project development costs plus all operation and maintenance costs. The actual loan/grant mix is based on WWDC funding criteria and the sponsor's ability to pay.

B. Program Status - Water Resource Planning

1. Water Investment Management

During the development of the Department of Commerce, the Wyoming Water Development Commission (WWDC) was named as the successor agency to the Economic Development and Stabilization Board for the administration of the state's investment in Buffalo Bill and Fontenelle Reservoirs (Chapter 44 of the 1990 Session Laws). Subsequently, the state acquired storage in Palisades Reservoir (Chapter 18 of the 1991 Session Laws). The WWDC is responsible for insuring that the state's annual loan payments and operation and maintenance obligations are met on the Buffalo Bill Enlargement, Fontenelle Reservoir and Palisades Reservoir.

In addition, the WWDC collects payments against outstanding project loans. Presently, all project loan payments have been made. The WWDC also monitors potential water sales from those completed projects in which the state retained limited partnerships.

2. Instream Flow

The Water Development Commission has two roles relative to the instream flow law. One is assigned by statute; the other is implied by our duties as the water development planning agency for the state.

a. WS 41-3-1004 assigns the Commission the responsibility to generate feasibility reports for all instream flow permit applications. The reports are hydrological analyses of the water availability in the reach of the stream in which the applications apply. The analyses also quantify existing water rights above and within stream segments.

b. As the water development planning agency, the Commission will also review the instream flow requests to insure that they do not conflict with future potential water development opportunities.

To date, seventy-four (74) applications for instream flow water rights have been prepared by the Wyoming Game and Fish Department. As of February 1, 1997, the WWDC has published fifty-eight (58) feasibility studies. The Wyoming Game and Fish Department has indicated that it will be preparing four applications per year for instream flow water rights.

3. Water Related Research

The Commission participates in research projects relative to water development problems and issues which are not necessarily project specific but are important to general aspects of water development in Wyoming. The Commission participates in research projects to gather the information that will be needed to reduce project costs and address permitting issues and specific environmental problems.

The Commission has developed working relationships with the State Engineer's Office, the U.S. Geological Survey and University of Wyoming's Water Resources Center to conduct research on such water related issues as hydrologic modeling, flushing flows, irrigation evapotranspiration, conveyance loss, and riparian zone management. In recent years, the WWDC has reduced its participation in the very general research and is concentrating on those issues that impact project development and budgets.

4. Basin Wide Planning

The planning aspects of the Water Development Program establish the framework for development strategies and serve to identify and resolve water related issues. The WWDC develops basin-wide plans identifying water supply problems and water development opportunities. Planning studies have been completed for Northeastern Wyoming and the Big Horn River, Powder River, Tongue River, Upper Bear River, Upper Green River, Upper Laramie River and Wind River Basins.

These basin wide plans, as well as the project specific evaluations, can be used to inventory water supplies, estimate existing uses and outline basin-wide water development strategies. Chapter 26, 1997 Session Laws, authorized the Commission to conduct a "Phase I Reconnaissance" study to perform a needs assessment and a "Phase II Feasibility" analysis to define resources necessary to implement a comprehensive statewide planning process. Basin-wide plans will provide the foundation for the state planning process.

5. Groundwater Grant Program

The 1981 Session of the Wyoming Legislature enacted WS 41-2-119 which authorized the Water Development Commission to grant up to three million dollars to incorporated cities and towns for feasibility studies and exploration programs to evaluate the potential use of underground water for municipal purposes. Municipalities were eligible to receive up to $200,000 in state funds, and were required to provide 10% of total project costs in local matching funds. In 1984, the legislature amended WS 41-2-119 to add an additional one million dollars to the account and to increase the required local match from 10% to 25%.

Municipalities are required to submit an application containing a detailed feasibility study of the area where exploration is anticipated. If the data is sufficient to indicate a high probability of locating water, the Commission can award funds for exploratory drilling. If no feasibility study exists, or if existing data is judged inadequate, municipalities can apply for funds to complete such a study. Approval of feasibility study funding also reserves a specified amount to be used for exploratory drilling. If the funded study indicates a high probability of locating groundwater, the Commission can authorize release of exploratory drilling funds. If not, the Commission will terminate the project at that point and return the earmarked exploratory drilling funds to the groundwater account for distribution to other communities.

As of July 1, 1997, 35 municipalities had received assistance from the program.

C. Program Funding

1. Water Resource Development

The administration of the water resource development activities costs approximately $1,775,000 per biennium. These costs are included in the agency budget, which is appropriated from Water Development Account No. 1. This amount does not include project specific budgets which are appropriated by the legislature as described in the following paragraphs:

a. Water Development Account No. 1

The New Development Program is funded by Water Development Account No. 1 [WS 41-2-124(a)(I)] which has received general fund appropriations of $117,600,000, receives revenues from a 1.5% excise tax on coal, and receives the accrued interest on the account's unspent balance. Legislative approval must be granted prior to allocating water development account funds to a particular project. Income from the tax and interest and payments for outstanding loans is approximately $28,000,000 per year. The WWDC is committed to phase or delay projects to insure its recommendations do not result in overruns of the account.

b. Water Development Account No. 2

The Rehabilitation Program is funded by Water Development Account No. 2 [WS 41-2-124(a)(ii)] which receives revenues from a 0.167% severance tax on oil and gas and the interest accrued on the account's unspent balance. Legislative approval must be granted prior to allocating water development account funds to a particular project. Income from the tax and interest and payments for outstanding loans is approximately $5,000,000 per year. In 1995, requests for project funding exceeded the funds available. The WWDC is committed to phase or delay projects to insure its recommendations do not result in overruns of the account.

2. Water Resource Planning

The administration of the water resource planning activities costs approximately $235,000 per biennium. These costs are included in the agency budget, which is appropriated from Water Development Account No. 1.

a. Water Investment Management

These activities are funded by the agency budget, which has historically been appropriated from Water Development Account No. 1. The administrative costs of this program are approximately $10,000 per biennium. However, as project financial commitments on Fontenelle Reservoir cannot be met with existing revenues from water sales, appropriations of $540,000 per biennium are needed to meet loan payment and operation/maintenance obligations to the Bureau of Reclamation.

b. Instream Flow

The administrative costs associated with the preparation of instream flow report are approximately $70,700 per biennium. In addition, the WWDC requests $100,000 per biennium for consultant services for completion of some instream flow feasibility studies.

c. Water Related Research

The administrative costs associated with water related research including special assignments from the governor and legislature are approximately $124,000 per biennium. Over the past ten years, the budget for contract services for this work has been reduced by the WWDC from $250,000 to $25,000 per biennium. In addition, the state's involvement in interstate endangered species efforts is funded from this budget category, which costs approximately $69,000 per biennium.

d. Basin Wide Planning

Depending on the complexity, basin wide planning studies cost between $150,000 and $500,000. Much of the existing water planning data should be updated. The operation of the Water Resource Data System and other necessary contract services costs approximately $501,000 per biennium. It costs approximately $30,800 to administer the planning efforts.

e. Groundwater Grant Program

Of the $4,000,000 appropriation, approximately $300,000 remains available for program funding. There are no current plans to seek additional funding. Administration of the program costs are minimal.

3. Other

The Wyoming Legislature has periodically appropriated funds from the water development accounts to fund the operation of state government, special projects, and litigation. As of July 1, 1997, $97,100,000 has been appropriated and $77,138,000 has been expended from Water Development Account Nos. 1 and 2 for these non-project purposes. In addition, through an executive order by the Governor, the interest income to be received by the accounts was diverted to the general fund for three years, which impacted the accounts by approximately $47,000,000.

D. Program Evolution

In order to develop a strategic plan for the program, the history and future of the Wyoming Water Development Program must first be considered. During the 1982 legislative session, funding was requested for 28 different projects. Over one-half of the projects included new dams or rehabilitation of existing dams. By contrast, during the 1995 legislative session, construction funding was requested for 18 different projects. None of those projects included a dam.

While dam construction and rehabilitation remains an important element of the Water Development Program, the number of dam projects will not be as great as other water development projects. To date, six new development dam projects and fourteen dam rehabilitation projects have been completed. The Buffalo Municipal project (Tie Hack Dam and Reservoir) and Sheridan's Twin Lakes Dam and Reservoir enlargement are currently under construction. The final environmental impact statements are underway for the Greybull Valley Irrigation District Roach Gulch Project and the Little Snake River Valley Dam and Reservoir Project. The Deer Creek Project is delayed pending the outcome of the North Platte Litigation. The other dams in the planning process are the enlargement of the Ray Lake Dam on the Little Wind River in Fremont County and, as an alternative to Deer Creek, the Pathfinder modification project. Hopefully, these projects will be under construction within the next five years.

There are reasons the number of dams in the Water Development Program are less than originally anticipated. The first and foremost reason is cost. It is very difficult for a project sponsor to afford a storage facility even with the most favorable financing terms now available within the program. Second, the federal permitting processing is more costly, time consuming and restrictive than it was in 1982. For example, in 1985, the federal 404 permit for the Sulphur Creek Dam was obtained in nine months. The permitting process cost was approximately $50,000. In 1995, after two and one-half years, we were still awaiting the issuance of the 404 Permit for the Buffalo Municipal Dam, a smaller and less complex project than the Sulphur Creek Dam. In 1996, at the conclusion of the permitting process for the Buffalo Municipal Dam, the actual costs related to permit acquisition were approximately $650,000. New federal requirements for wetlands mitigation, purpose and need criteria, and alternative analyses are the major reasons for the increased costs.

The impact of federal requirements on the program can best be demonstrated by the history of the Little Snake River Valley Dam and Reservoir Project (Sandstone Project). Originally, the WWDC sought a 404 permit for a 52,000 acre foot reservoir that would yield 12,000 acre feet of water per year for irrigation purposes and 20,000 acre feet of water per year for future industrial use. The U.S. Army Corps of Engineers denied the permit using the argument that there was no specific defined use for 20,000 acre feet of the water. The project did not meet the federal requirements for "purpose and need", therefore the impacts to wetlands and aquatic habitat resulting from the project was not warranted, no matter how well those impacts were to be mitigated. This decision severely impacted the ability of the program to construct storage projects and market water for future uses.

More recently, the federal agencies have interpreted their rules and regulations to develop a position that they can only issue permits for the "least environmentally damaging alternative" that meet the federal perspective of "purpose and need". Unfortunately, the federal perspective of "purpose and need" tends to ignore state goals and objectives such as increased recreation, hydropower production, instream flow releases and economic development. The result is the construction of small, single purpose projects. If this position prevails, dam construction will be limited to small, off-channel reservoirs supplied by canals diverting water from streams and rivers. For example, the Greybull Valley Project, intended as a supplemental agricultural water supply, consists of a 30,000 acre foot off-channel reservoir supplied by a canal and diversion structure on the Greybull River.

Another indicator of the history of the program is an analysis of how water development funds have been spent over the past seventeen years. The following is a breakdown of total program expenditures from 1980 to June 30, 1997:

Type	Total Expenditure ($-millions)	Percentage
1.  Agricultural	53.3	10.6
2.  Multipurpose	64.8	12.9
3.  Municipal	280.4	55.8
4.  Special Districts	27.3	5.4
5.  Non-Project	77.1	15.3
Total	502.9	100.0

From program history and projections into the future, the following conclusions can be made relative to the next five years:

1. While the Water Development Program has provided assistance to several agricultural projects, those projects have been relatively small in scope. The agricultural industry is presently concentrating on preserving what they have rather than developing new supplies. With one exception, the Wyoming Water Development Program has not been requested to assist in a water project that would place new lands under production. In the next five years, the demand for project assistance for agricultural projects will remain limited and focused on the rehabilitation or improvement of existing facilities. However, those agricultural projects that rely on federal storage projects can expect unfunded federal mandates relating to dam safety, water conservation and environmental protection.

2. The major expenditures in the multi-purpose category have been for the state's share of the construction of the recently completed Buffalo Bill Dam Enlargement and the repair and maintenance of Fontenelle Dam. It is difficult to acquire the necessary federal permits and clearances for construction of large mainstream dams and reservoirs. In addition, the costs associated with construction of large mainstream dams are extreme. For the short term, it is anticipated that multi-purpose expenditures will be limited to enlargements of existing facilities to replace storage lost due to silt accumulation, to construction of small off channel reservoirs, and to construction of other miscellaneous projects which serve more than one type of use, e.g. diversion structures that provide water for irrigation while simultaneously accommodating fishery needs.

3. Municipalities and other public water systems have been the major beneficiaries of the Wyoming Water Development Program. Communities must not only be concerned with the quantity of water it can supply for culinary, irrigation, and fire flow purposes, it must also insure that the water quality meets ever-changing EPA requirements. Further, as urban populations increase, the amount of water communities must supply for public health and welfare purposes must also increase. In addition, municipalities are aware that they need enough good quality water to meet their existing demands, and the demands of the increasing number of subdivisions presently outside their corporate limits as well as enough water to insure future economic growth. The Wyoming Water Development Program has been responsive to the needs of Wyoming communities for the past seventeen years and while major municipal water supply projects have been funded, demands on the program for municipal purposes will continue for the next five years and beyond.

4. Special districts that provide domestic water are faced with the same EPA requirements as municipalities. The Water Development Program is receiving more requests for funding assistance from special districts. The problem, in part, can be explained by Wyoming's previously weak subdivision laws. Subdivisions served by shallow groundwater wells are experiencing water quality problems caused by septic systems as population densities increase. The long term solutions are to improve the municipal water supply systems so they can be more reactive in solving the problems of the surrounding subdivisions. In the short term, for those subdivisions already formed, it is apparent that the Wyoming Water Development Program will be seeing additional requests for funding assistance from special districts. However, the Legislature passed Chapter 179 of the 1997 Session Laws, which amended existing subdivision regulations to more thoroughly address water and sewer health and safety needs. This action, coupled with improvement and expansion of municipal systems, so they can be more reactive in solving water supply problems of the surrounding subdivisions, may provide the necessary long term solutions for special districts.

5. Non-project expenditures relate to appropriations made from the water development accounts to augment the general fund. For example, the agency budgets for the Water Development Office, State Engineer's Office, and Water Resources Center have been appropriated from the water accounts. In addition, an appropriation was made to supplement the funding for education. The state's costs for water related litigation is also funded from the water development accounts.

In summary, the scope of the Wyoming Water Development Program has changed over the past seventeen years. However, the program continues to serve the principle that initiated the program, the effective and efficient use of water entitlements to preserve Wyoming's water for Wyoming's future.

E. Program Operation

Originally, the Interdepartmental Water Conference, the predecessor to the Wyoming Water Development Commission, was staffed by the State Engineer's Office Water Planning Program. In 1979, the Wyoming Water Development Commission was formed and an independent staff was developed. This move was made to streamline the administration of the program and make it more effective.

The statutory authority for the Wyoming Water Development Program is vested with the ten member Wyoming Water Development Commission (WWDC) which meets 8 to 12 times per year. The program is administered through the Wyoming Water Development Office (WWDO) which includes a director and 14 staff members. The operating budget is approximately $1.6 million per year. Over the past five years, the commission and staff have overseen and administered project expenditures averaging approximately $30 million dollars per year.

The Wyoming Legislature has periodically increased the responsibilities of the WWDC and WWDO. In 1986, the administration of the construction of water development projects was transferred from the Department of Economic Planning and Development (DEPAD) to the WWDC. Again, in 1986, the Legislature made the WWDC an integral party to the administration of the instream flow law. In 1991, the management of the state's water investments was transferred from the Economic Development and Stabilization Board to the WWDC. Except for a transfer of personnel from DEPAD to WWDC in 1986, the additional duties have been executed with existing staff.

The Wyoming Water Development Office includes a Planning Division and Construction Division. Each division is managed by an administrator who also assists with department and project management. Each division has four project managers who are responsible for day-to-day project administration and special projects. The Planning Division serves to administer project studies (Level I Reconnaissance Studies and Level II Feasibility Studies), assist the Director and WWDC in making funding recommendations, and perform the planning functions of the agency. The operation of the Planning Division is guided by the "Operating Criteria of the Wyoming Water Development Program". The Construction Division serves to administer Level III Construction Projects. The operation of the Construction Division is guided by the "Operating Criteria of the Construction Division, Wyoming Water Development Office". The director is responsible for the operation of the entire program, serves as the contact with the WWDC, Governor, and Legislature, and performs special assignments for the Governor. The director, administrators and project managers are supported by a small fiscal control and secretarial staff.

Project administration is the primary priority of the staff due to the funding involved. Basin or state planning efforts have been completed only when staff time allows. Given the number of planning and construction projects, there has been minimal staff time available for basin-wide planning. Staff requirements and the project work load for project managers are determined by the number of projects within the program, not necessarily by the amount of appropriations. Administering a small project can be as time consuming as working on a larger project. The WWDC will continue to use improved technology to reduce administrative costs. However, if the number and complexity of the projects continues to increase and if planning efforts are to improve, additional project managers may be needed within the next five years.

The WWDC uses private sector consultants for the preparation of project technical studies such as Level I Reconnaissance Studies and Level II Feasibility Studies. Further, the WWDC contracts with the project sponsors to serve as the lead agency during the Level III Construction Process. The project sponsors use the private sector for project plans and specifications. Further, the project sponsors are required to solicit bids from private contractors for project construction.

While the statutes pertaining to the Wyoming Water Development Program provide guidance and the framework for the program, they were intentionally meant to be very broad. The Wyoming Water Development Commission was instructed by statute to develop the priorities, guidelines, and criteria for the program. The "Operating Criteria of the Wyoming Water Development Program" developed by the WWDC, in consultation with the Legislative Select Water Committee, serves this purpose. The criteria is reviewed on an annual basis to insure it directs the program in an efficient and effective manner and continues to address the needs of Wyoming in a manner consistent with available program resources.

Presently, there are two state agencies providing funding assistance for water projects. The WWDC provides funding for water supply projects, while the State Land and Investment Board provides funding for water treatment and distribution projects. On January 4, 1996 the State Land and Investment Board adopted rule amendments for Wyoming Joint Powers Act Political Subdivision Loans and Federal Mineral Royalty Capital Construction Account Grants. These rule amendments require the Director of the State Land and Investment Office to request that pertinent state agencies assist in the review of applications and provide written comments within ten working days. The process has eliminated some confusion on the part of project sponsors, who in the past may not have known which agency to contact for funding assistance. The comments between agencies identify which agency may fund the project or components of a project and insure the efficient allocation of limited state resources for project funding.